Medicare for All: A Leap into the Known?

This post is part of our symposium on Medicare for All. You can find all the posts in the series here.

Nathan Cortez –

The Affordable Care Act of 2010 was the most significant health legislation since Congress created Medicare and Medicaid in 1965, breaking a half-century of health policy incrementalism. But thanks to the Senate, the final bill failed to include a “public option.” And thanks to the Supreme Court, many states rejected Medicaid expansion. Ultimately, the ACA preserved private insurance as the main source of coverage, rendering the act much more incremental than originally envisioned.

Almost a decade later, we are seeing more ambitious reform ideas like “Medicare for All” which until very recently was a political nonstarter. My contribution to this symposium argues not only that some version of Medicare for All is necessary, but also that it may not be as radical as critics claim.

Exceptional but not good.

Most Americans know that our health system is unique in the world. But the numbers still shock. We spend $10,586 per person on health care annually, roughly double the spending in Canada ($4,974), the U.K. ($4,070), the Netherlands ($5,288), and Germany ($5,986). In fact, U.S. health spending accounts for almost half of worldwide health spending each year ($3.3 trillion of the $7.5 trillion spent in 2016, or 44%).

But we are not any healthier for it. We rank 29th out of 195 countries in one recent study, and lag in other outcomes measurements. Nor do we cover everyone. Despite the ACA – or rather, due to a decade’s worth of efforts to undermine the ACA – we still leave roughly 28.5 million uninsured and growing. Many Americans understand that we could accomplish more with less. As Steffie Woolhandler and David Himmelstein frame it:

The leading option for health reform in the United States would leave 36.2 million persons uninsured in 2027 while costs would balloon to nearly $6 trillion. That option is called the status quo.

Another option may be Medicare for All. Of course, global experience shows that there is more than one path to universal coverage. In some ways the ACA resembled previous reforms in the Netherlands and Switzerland, relying on private plans, an insurance mandate, thick regulation, and “managed competition.” In fact, the 2006 Dutch reforms were “Obamacare before Obamacare.” Like the ACA, the Dutch reforms were inspired by neoliberal notions that competition among for-profit, private sector insurers would achieve universal coverage while improving quality, offering consumers more choices, and reducing costs. And like the ACA, the Dutch reforms generated even more fragmentation, complexity, and dissatisfaction. Both sets of reforms failed to control costs, bewildered consumers, and still left some uninsured.

In retrospect, the ACA wasn’t muscular enough. Can Medicare for All accomplish more?

The mental barrier.

Historically, fears of “socialized” medicine and “rationing” have discouraged more earnest evaluations of how single-payer might work in the United States. Of course, a key component of our health care system is socialized. Medicare Part A (hospital coverage for the elderly and chronically disabled) is essentially social insurance in the German mold. Like Germany’s non-governmental, not-for-profit “sickness funds,” Medicare Part A is funded by payroll taxes and pays for care provided by independent, private sector practitioners. An important point here is that private insurance remains available in Germany. Citizens earning less than around $70,000 per year are covered automatically by the sickness funds; citizens above that threshold can opt out and choose private insurance, though only around 25% do. Thus, around 86% of the population is covered by sickness funds, while around 11% are covered by private plans (the rest are covered under special programs).

Medicare for All, then, would be somewhat distinct from the “nationalized” health systems of the U.K. (NHS) and Canada (Medicare), which are funded through general revenue taxation and rely more on both public sector providers (though private practitioners still predominate) and central planning (though many functions are delegated to local authorities). Medicare, for its part, remains popular, as do most government health plans. But framing single-payer reforms as “Medicare expansion” or “Medicare for All” may sidestep the socialized medicine sideshow.

If fears of socialized medicine are easily bypassed, however, fears of rationing and queues remain. Critics point to reviews by NICE within the NHS, particularly its use of “quality-adjusted life years” (QALYs) to determine the cost-effectiveness of new treatments (generally, a cost of £20,000 per QALY is considered presumptively cost-effective, while anything over £30,000 is presumptively not, while items in between received enhanced review). But among our peer countries, only England and Australia use cost as a significant, explicit determinant in national coverage decisions. Thus, coverage assessments of new medical treatments in most health systems are much more generous than many Americans might assume.

Moreover, Medicare, by contrast, was designed to preserve physician autonomy and patient choice, not make cost-effectiveness decisions. If Medicare is good at one thing, it’s promptly paying claims. Medicare is less well-equipped, as Nick Bagley observes, to control costs or improve the quality of care. If anything, our Medicare program could be made much more cost-effective.

Of course, the ACA included various experiments to make Medicare more cost-sensitive, such as the Independent Payment Advisory Board to make expert recommendations on how to better economize, the CMS Innovation Center to explore new payment and delivery models, and the Patient-Centered Outcomes Research Institute (PCORI) to conduct comparative effectiveness studies. But these were all too modest and not binding enough to make much of a difference. Scaling up to Medicare for All would also require scaling up these programs. But none are likely to lead to the types of “rationing” described by caricatures of foreign health systems.

Just as we are no strangers to socialized medicine, we are also no strangers to rationing, if the term is broadly construed. As Uwe Reinhardt tried for many years to explain, rationing decisions are already being made by private insurers through utilization reviews, medical necessity determinations, and the like. No system in the world can provide all care at all times to all people. Because health resources are not unlimited, even private insurers have to decide what they can and cannot cover.

Moreover, single-payer systems have much more purchasing leverage to negotiate for lower prices, something we lack in an extremely decentralized, fragmented system. In fact, we don’t even let our larger programs like Medicare negotiate for lower drug prices, a bald transfer of wealth from taxpayers to the drug industry. Thus, private insurers in the U.S. “ration” care more than Medicare does.

A leap into the known?

Medicare for All would represent a fundamental shift in our system no doubt. But we are not leaping into the unknown, as demonstrated above. Of course, as comparative scholars emphasize, we shouldn’t be too casual in drawing policy lessons from other health systems. But our own experience with Medicare should ease our fears of socialized medicine and rationing.

Yet, even if we wanted Medicare for All, how would it survive the Senate? Do a majority of Americans now agree that the government can better finance health care than the private sector? Can the left and labor unions overcome countervailing interests, particularly those of the embedded $3.3 trillion health care industry? How do you tell a $3.3 trillion industry it should be $2 trillion industry? (If we spent $5,986 per person on health care annually like Germany does, we would spend roughly $1.96 trillion). Indeed, the ACA only passed in part by accommodating interest groups like PhRMA, the American Hospital Association, and the American Medical Association. What accommodations might be required this time? Can we afford those accommodations?

On the other hand, can we afford not to make them? After all, the alternative to Medicare for All, as noted above, is that in eight years we have a system that costs $6 trillion and still leaves 36 million uninsured.